Commentary: China’s economic prospects still strong

The nation does face challenges as its gross domestic product growth has slowed.

Commentary: China’s economic prospects still strong

The nation does face challenges as its gross domestic product growth has slowed.

Commentary: China’s economic prospects still strong

The nation does face challenges as its gross domestic product growth has slowed.

By Alexander Ullmann | Jan 25, 2019

China President Xi Jinping reportedly is concerned about social stability after recent economic data suggests the Chinese economy is slowing. President Xi held a seminar for top provincial leaders and ministers on Monday, the same day the country’s annual gross domestic product statistics for 2018 were released. Warning of potential risks in the future, Xi said the Chinese Communist Party (CCP) “is facing long-term and complex tests in terms of maintaining long-term rule, reform and opening up a market-driven economy and within the external environment.” The data concerning Xi and the CCP is an annual GDP growth rate of 6.6 percent for 2018 released by the National Bureau of Statistics of China. The GDP growth rate marked the slowest pace since 1990. This figure was anticipated by the Chinese government, and Bluewater Reporting forecast a similar annual growth rate on Dec. 27. Although the GDP growth rate was anticipated, the Chinese people hold their government to a high standard. As the second-largest country in the world in terms of GDP, Chinese growth is much greater than countries of comparable size. India has a similar population and economic growth rate to China, but according to the World Bank, Indian GDP is less than a quarter of Chinese GDP. The Indian economy, along with almost every other country in the world, is also more volatile than the Chinese economy. This phenomenon can be seen by the last financial crisis in the United States. The United States going into recession negatively impacted most countries worldwide. China was easily able to avoid a recession, even while the United States was its largest trading partner.

With impressive economic growth statistics and lack of volatility, President Xi and the CCP should not be worried about long-term rule and social stability, yet they are. This has led economists such as Li Keqiang to doubt the validity of official GDP statistics released by the National Bureau of Statistics of China. Li Keqiang is the second ranking member of the Chinese government and is famous for calling GDP statistics “man-made and for reference only.” These fabricated statistics are why forecasting the Chinese economy is much easier than other economies, such as the United States. The chart below shows a scatter plot with a trend line representing Chinese GDP growth for the past nine years. A simple linear regression equation allows for GDP growth to be forecast accurately. This is what allows the Chinese government to predict GDP growth far in advance. The Chinese target for GDP growth in 2019 is 6.4 percent, which follows the path of our trend line.

Even with inflated economic growth statistics, there are still some official metrics that justify civil unrest in China. According to the World Bank, GDP per capita in China was only $8,826 in 2017. As a point of reference, GDP per capita in the United States was $59,531 in 2017. Bluewater Reporting follows the largest economies in the world for potential externalities that will impact the ocean shipping industry. China is the largest exporter of goods in the world and thus one of the most important economies to Bluewater Reporting. The recent statements by President Xi are cause for concern, as civil unrest can lead to a reduction in productivity.

In the past three years, China has been stable and the trade lanes tracked by Bluewater Reporting have shown significant growth. Using the Bluewater Reporting Capacity Report tool, the chart below illustrates that container services calling China in 2018 collectively operated with 1,854 vessels with 12.6 million TEUs, up 0.7 percent and 11.3 percent, respectively, from two years prior.

Average container vessel size for services calling China also increased by 10.6 percent between 2016 and 2018, from 6,146 TEUs to 6,799 TEUs. Each week, China was typically called by container vessels that collectively offered 149,308 reefer plug slots, up 10.8 percent from two years prior. China faces significant challenges as social issues arise and GDP growth slowed in 2018. While the official GDP statistics should be brought into question as Li Keqiang suggests, there is no doubt that the Chinese economy is still growing as Bluewater data shows. If China can maintain economic growth and long-term political stability, the Chinese economy has the potential to become the largest in the world.

AASHTO and its member state departments of transportation stand ready to work with the administration and Congress on a national plan to shore up the Highway Trust Fund and make the investments needed to modernize our aging transportation infrastructure.

Jim Tymon, American Association of State Highway and Transportation Officials executive director

The South Carolina Ports Authority had its strongest January on record with 205,689 TEUs handled, a 12.5 percent fiscal year-over-year growth in container volume.